RIM Averts BlackBerry Ban in India With 60-Day Security Test

By Ketaki Gokhale and Santosh Kumar -
Aug 30, 2010

Research In Motion Ltd. averted a
ban on its BlackBerry services in India that would have affected
more than a million users and halted the Canadian company’s
expansion in the world’s second-largest mobile-phone market.

India’s telecommunications department will test RIM’s
monitoring solution for 60 days to see if it allows security
agencies to tap its messenger- and enterprise-mail services,
Onkar Kedia, an Indian Home Ministry spokesman, said yesterday.
Officials had given the Waterloo, Ontario-based company until
today to provide monitoring tools or face a possible ban.

While India accounts for 2 percent of RIM’s 46 million
subscribers worldwide, a ban might have set a precedent for
other governments. Ehud Gelblum, an analyst with Morgan Stanley
in New York, lowered his recommendation on the stock to
“underweight” in an Aug. 20 note to investors, in part because
of the “ongoing chorus” of countries threatening to shut down
BlackBerry service.

“If BlackBerry allows this to happen here in India, it’s
not just an Indian effect,” Romal Shetty, executive director of
the telecommunications practice at KPMG’s Indian unit, said
before the decision. “It’s going to affect them in many other
countries.”

The shares fell 40 cents, or 0.9 percent, to $45.59 at 4
p.m. New York time in Nasdaq Stock Market trading. The stock has
dropped by a third in U.S. trading this year, more than Apple
Inc. and Motorola Inc.

Meeting Security Needs

RIM had said it would try to meet India’s security needs
while ensuring its clients’ communications are secure, a selling
point that’s helped it attract users including President Barack Obama. Saudi Arabian regulators let pass an Aug. 10 deadline to
shut down the service without taking action. The United Arab
Emirates has said progress is being made in negotiations with
RIM to avert a halt of the BlackBerry service from Oct. 11.

The outcome in India may set the tone for how the country
deals with services it says it wants to monitor. India intends
to find ways to track voice-over-Internet protocol services run
by companies such as Skype Technologies SA and Google Inc., a
government official, who declined to be identified, said Aug. 13.

RIM needs to persuade customers of the security of its
messaging system, Scott Sutherland, an analyst at Wedbush
Securities Inc. in San Francisco, said this month.

RIM held talks this month with clients including Goldman
Sachs Group Inc. and JPMorgan Chase & Co. to reassure them about
the security of the BlackBerry service, two people familiar with
the situation said. At least one corporate customer told RIM it
wasn’t satisfied with the explanations so far and sought an
additional meeting, according to one person.

Lead Forum

RIM offered to lead an industry forum in developing ways to
balance India’s security needs with customers’ privacy
requirements, according to a statement on Aug. 26. Secure data
transmission is an industrywide matter and important to India’s
economic development, RIM said.

The company maintains a “consistent global standard” for
lawful access to its messaging system, which “does not include
special deals for specific countries,” RIM said in the
statement. It said it can’t meet requests from governments for
codes to users’ data, because the BlackBerry corporate service
was designed to prevent RIM, and anyone else, from reading
encrypted information.

Nokia Oyj, the world’s largest mobile-phone maker, will set
up servers in India by Nov. 5, allowing the nation’s security
agencies to monitor its customers’ e-mail, the Indian unit’s
Managing Director D. Shivakumar said yesterday.

The UAE is making “good progress” in talks with RIM to
resolve the issue, Yousef Al Otaiba, the Gulf state’s ambassador
to the U.S., said Aug. 17. Given the “positive development” in
meeting Saudi regulators’ demands, BlackBerry service was
allowed to continue in the nation, Saudi Arabia said Aug. 10.

The BlackBerry infrastructure was designed to be a global
system that works “independent of geography,” and it’s a
misperception that locating a network in India would help the
government gain access to encrypted information, RIM has said.